House prices and the macroeconomic environment in Turkey: The examination of a dynamic relationship

Abstract

The aim of this paper is to examine the dynamic relationship between house prices, income, interest rates, housing permits, and share prices in Turkey, using Structural Vector Autoregressive (SVAR) models. This paper uses both monthly and quarterly data for the Turkish economy and applies four different SVAR models to reveal this dynamic relationship over the 2003-2016 period. The results show statistically significant and substantial relationships between the variables. The analysis also shows that house prices and housing permits as housing market variables are very sensitive to monetary policy and income shocks. The key finding of the study for policymakers is that a change in mortgage rates is the factor that most changes house prices. The study also shows that the housing market plays an important role in transferring monetary policy to the real economy in Turkey.

The dynamics of house prices and fiscal policy shocks in Turkey

“…Finally, a 1-unit increase in mortgage rates raises both house price indicators by about 0.05 and 0.06, respectively. These results are in line with previous studies on house prices in the Turkish economy (Yıldırım and İvrendi 2017). Since a mortgage rate increase is a major cost element in housing construction, a rise in interest rates increases house prices in the long run even if it is small.…”

“…House prices react positively to fiscal shock. In line with the findings of earlier literature (Bjørnland and Jacobsen 2010;Iacoviello 2010;Musso et al 2011;Wadud et al 2012;Robstad 2017;Yıldırım and İvrendi 2017), an increase in house prices leads to a statistically significant increase in GDP.…”

“…However, the share of government expenditure in GDP increased by about 75%, from 8% to 14%. Although government expenditure has followed a fluctuating trend and real house prices have risen relatively steadily, both series show an 1 For studies investigating the relationship between monetary policy and the housing market, see Iacoviello 2010;Iacoviello 2005;Apergis 2003;Bjørnland and Jacobsen 2010;Elbourne 2008;Yıldırım and İvrendi 2017. upward growth trend. Figure A1 also reveals that Since 2015 government expenditure in Turkey's economy has increased substantially.…”

The Macroeconomic Determinants of The Housing Prices in Turkey

“…Their empirical investigation about İstanbul, Ankara, İzmir, and Turkey as a whole shows no evidence for a housing bubble during this period. The empirical findings of Yıldırım and İvrendi (2017) support a dynamic relationship between interest rates, income, housing permits, and house prices. The authors determine the high sensitivity of house prices to monetary policy and income shocks.…”

Ekonomi̇k Büyümeni̇n Konut Fi̇yatlari Üzeri̇ndeki̇ Asi̇metri̇k Etki̇si̇: Nardl Uygulamasi

“…2010 yılından önce konut fiyatlarını ele alan ve Türkiye için belirli dönemleri kapsayan çalışmalarda (Halıcıoğlu, 2007;Sarı ve diğerleri, 2007;Badurlar, 2008;Öztürk ve Fitöz, 2009) reel gelirin konut talebini etkileyen önemli bir değişken olduğu bulguları yer almaktadır. 2010 yılından sonra konut fiyat endeksi değişkeni kullanılarak yapılan çalışmalar ise (Kargı, 2013;Dilber ve Sertkaya, 2016;Yıldırım ve İvrendi, 2017;Afşar, 2018;Gebeşoğlu, 2019;Canbay ve Mercan, 2020;Coşkun ve diğerleri, 2020) daha çok konut fiyatları ile ekonomik büyüme arasındaki uzun dönemli ilişkilere dikkat çekmektedir.…”